Why it is Critical for Hyperlocal and eCommerce Companies in India to Get Last Mile Delivery Right

This is a Guest Post. The author, Rajiv Sharma,is the Co-Founder and Managing Director of dPronto, a logistics company specializing in last mile delivery.

Economies of scale, finely tuned operational efficiencies, advanced technologies and above all, high quality manpower are the key factors that lead to success in last mile delivery.

Last mile delivery (LMD) is the final stage in a delivery cycle when a customer receives the product in hand. The exponential growth of online buying in India has resulted in lakhs of packets to be delivered every day. Also, in recent years all major eCommerce players have started offering next day and same day deliveries. And hyperlocal companies which deliver grocery and food offer even within-the-hour deliveries. When you add crowded streets, huge traffic snarls and difficulty in locating addresses to this mix, LMD indeed becomes a significant challenge for e-commerce players.

The reason last mile delivery is hot right now is because it’s no longer just a back-end process that happens after a sale is made — it’s truly becoming a competitive differentiator that, if done well and correctly, drives sales and enhances customer loyalty. Last mile plays a crucial role in the supply chain – get it wrong, and you risk alienating consumers; get it right, and you may just gain a customer for life. Unfortunately, any supply chain is only as strong as its weakest link and at present last mile is that weakest link. Economies of scale, finely tuned operational efficiencies, advanced technologies and above all, high quality manpower are the key factors that lead to success in last mile delivery. When customers trust you and spend money to buy your product, it’s your duty to deliver product on time and free of any damage – this is the constant feedback which eCommerce and hyperlocal companies receive constantly these days.

The Indian Scenario

eCommerce logistics market in India is pegged to reach $5.1 billion by 2020. Last mile logistics constitutes 40% of eCommerce logistics and is expected to grow at a CAGR 48% to reach $2.1 billion by 2020. A plethora of new last mile logistics players have come up sensing this huge potential. Many of these logistics startups have got unbelievable amounts of funding just based on the so called “idea” without ever getting their ability to execute going under scrutiny. Over-engineering of the technology, over staffing with puffed up salaries at all levels and an acute lack of on-ground operational experience have made the cost per delivery prohibitive for such players. Add to this the high attrition among delivery staff – as high as 30% per month – faced by such companies, the cost goes over the top. At the same time, eCommerce companies are really driving hard bargains to cut down on the logistics costs and hence the price for LMD is also constantly under pressure. This is the reason why many LMD startups have closed shop recently.

There are thousands of couriers in India, and very few of them operate nationally or even regionally, which means eCommerce companies have to work with a patchwork of couriers in every market they serve. And most of these couriers use proprietary software systems to manage their operations — if they use any software at all! In some cases, service providers subcontract deliveries to other agents in the market, which adds another layer of complexity. Simply put, the local delivery market is very fragmented and much lower on the IT maturity curve than other segments of the transportation industry. As a result, many eCommerce companies have poor visibility and control of their local delivery operations, which impacts cost and service levels. With last mile delivery playing a crucial role in directly impacting productivity, revenues, and customer experience, eCommerce companies should hire logistics companies which have efficient delivery management softwares that help in increasing efficiency – locating the address, tracking the delivery boys’ movement, real time updation of status etc. This will also reduce the paper work done by the delivery boys which typically takes about 2 hours every day.

Strategies for getting last-mile delivery right

The quality of interaction at the ‘door’ cannot be emphasised enough. This is one area which most of the current crop of LMD startups haven’t got right. The intimate connection with customers inherent in home deliveries separates last-mile from other transportation legs. When you deliver goods inside people’s homes, you have to be extremely careful. This is where the manpower strategy plays a crucial role. Unfortunately, the manpower strategy of most players is just poaching delivery boys from each other without caring about their quality. No emphasis is paid to sourcing fresh manpower and more importantly, training and motivating them. Remember, you can have the fanciest of technologies; but if the delivery boy is not providing a good experience at the door of the customer, your fancy technology alone hasn’t resulted in customer satisfaction. And, if the delivery boy turns out be crooked and makes some of the packets ‘disappear’, you have lost many customers for life.

Innovative measures such as preferred time slot day time delivery and night delivery are add-ons which a good LMD player can provide once he has mastered rest of the components mentioned above. Generally eCommerce web-stores do not get bulk orders from their customers, which means that the order size will be small. The cost of delivery can be justified only in case there is large number of orders from customers located in close areas. The cost of delivery becomes high if orders are small and distributed over a wide region. A good last mile logistics company can deliver packets of multiple e-commerce companies in one delivery run, thereby saving costs for everyone.

To summarise, last mile delivery has become crucial in ensuring customer satisfaction and creating that much needed differentiation at the ‘door’ in the burgeoning Indian eCommerce market. Online retailers – big and small – need to work with last mile logistics companies who have the right technology, PAN India reach, and access to constant supply of freshly trained delivery staff.

Rajiv Sharma is the Co-Founder and Managing Director of dPronto, a logistics company specializing in last mile delivery. Previously, he served as the CEO, Bharti Airtel Limited, prior to which he was the CEO and President of GMS Technologies (unit of Kodak).
Rajiv is an FMS alumnus.